Barbados has an exceptionally high ‘quality of life’ rating for a developing country. The economy, formerly a sugar monoculture, was developed over three decades to achieve a balance of growth and social development, and diversified into three main sectors: services, light industry and sugar. An offshore financial services sector, launched in 1985, has become the country’s second biggest source of foreign exchange after tourism.
Despite its economic success, Barbados experienced little growth in the 1980s and a recession in the early 1990s, when sugar and tourism earnings slumped. It had to call on the IMF for economic adjustment support and the government introduced economic austerity measures. By 1993 the economy was recovering and it continued to grow well throughout the 1990s, driven by tourism and construction. Action against drug-trafficking since the 1990s has made security and defence a significant item of expenditure.
With a small and open economy Barbados lacks scope for further diversification and remains vulnerable to economic downturn in its trade partners. After 2000 the economy went into recession due to the downturn in the USA and Europe and resulting falls in tourist numbers. It picked up in 2003 and grew steadily until 2008 when the world economic downturn again caused a sharp fall in tourism and pushed the economy into reverse. After a sharp recession in 2009 when GDP fell by 4.1 per cent, the economy hardly grew at all in 2010–14.